Carbon Border Adjustment Mechanism(CBAM):

The proposed changes to CBAM largely work to lessen the financial and administrative burden of CBAM certification requirements on importers. The proposal if adopted, would exempt 90% of importers included in CBAM, while covering 99% of total emissions.

Category	Current Law	Proposed Law
De Minimus Exceptions	Value-based exemption for all industries with shipments of CBAM goods priced under €150	Quantity-based system applied to importers of steel, aluminum, iron, fertilizers and cement if annual imports remain below 50 tonnes Excludes hydrogen and electricity imports
Price of CBAM	Price of CBAM certificates based on the quarterly averages of closing prices of the EU ETS allowances	From 2027, prices of CBAM certificates based on the weekly average of the closing prices of EU ETS allowances on the auction platform
CBAM Certificate Holding Requirements	Importers must hold CBAM certificates equal to 80% of emissions from imported goods at the end of each quarter Additional certificates can be purchased but only up to ⅓ more than the required holding amount	From 2027, importers must hold CBAM certificates equal to 50% of emissions from imported goods Companies must purchase only the exact number of certificates needed to meet this requirement
Purchasing of CBAM Certificates	Obligation to pay on imported CBAM goods beginning in January 2026	Payment for CBAM certificates covering 2026 imports will be postponed until February 2027
CBAM Declaration Submissions	The deadline for submitting the annual CBAM declaration and surrendering certificates is set for May 31st each year	The deadline for submitting the annual CBAM declaration and surrendering certificates is set for August 31st each year
3rd Party Filing	CBAM declarants are responsible for submitting their own CBAM declarations	CBAM declarants may delegate a 3rd party to submit their CBAM declarations
Change in Default Values	If emission data is unavailable the importers must use the alternative default values which are based on the worst performing EU installations	If emission data is unavailable, the average intensity of the 10 highest-emission exporting countries will be used Importers can choose actual or default values, with no verification needed for defaults
Default Values for 3rd Country Carbon Prices	Imports may only claim deduction based on actual carbon price paid in the 3rd country	The Commission will establish default carbon prices per country Allows deductions for carbon costs incurred in any third country during production, not just the country of origin
Emission Calculation	All emissions from production processes contribute to CBAM obligations	Emission calculations exclude certain emissions including finishing processes for specific steel and aluminum goods Excludes precursors covered by EU ETS or linked carbon pricing systems
Anticircumvention	General provisions with limited enforcement	Explicit rules against splitting imports and using non genuine arrangements to avoid CBAM obligations National authorities empowered to impose penalties and jointly enforce rules with the commission

Comparing EU ETS Allowance Closing Prices Based on Weekly v. Quarterly Averages:

The graph below compares EU ETS Allowance Closing Prices based on the current quarterly average calculation and the proposed weekly average. It is clear that this proposal would not have a large change in prices, though it would make the costs of carbon certificates more sensitive to market changes. This may lead to more uncertainty when approaching future costs for importers.

CBAM Certificate Cost Calculator:

This calculator estimates the cost of carbon certificates based on the weight of imports, emission factor, and EU ETS allowance prices. Use it to compare costs under the previous quarterly average pricing system versus the current weekly average pricing system. The equation to calculate the cost is below:

Weight of Imports (tonnes):
Emission Factor (tCO₂e/tonne):
Weekly Average of EU ETS Allowance Closing Prices (€/tCO₂e):
Quarterly Average of EU ETS Allowance Closing Prices (€/tCO₂e):